Related provisions for BIPRU 8.6.19

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GENPRU 2.2.6GRP

This table belongs to GENPRU 2.2.5 G

Topic

Location of text

Application and purpose of the rules in this section

GENPRU 2.2.1 R to GENPRU 2.2.4 G

BIPRU firms that only have simple types of capital resources (simple capital issuers)

GENPRU 2.2.7 G

Principles underlying the definition of capital resources

GENPRU 2.2.8 G

Which method of calculating capital resources applies to which type of firm

GENPRU 2.2.17 R to GENPRU 2.2.19 R

Purpose of the limits on the use of different forms of capital

GENPRU 2.2.24 G

Use of higher tier capital in lower tiers

GENPRU 2.2.25 R to GENPRU 2.2.28 R

Calculation of capital resources for insurers

GENPRU 2.2.22 G to GENPRU 2.2.23 G; GENPRU 2 Annex 1

Limits on the use of different forms of capital for insurer (capital resources gearing rules for insurer)

GENPRU 2.2.29 R to GENPRU 2.2.41 R

Calculation of capital resources for banks

GENPRU 2 Annex 2

Calculation of capital resources for building societies

GENPRU 2 Annex 3

Limits on the use of different forms of capital for banks and building societies (certain types of capital resources cannot be used for certain purposes)

GENPRU 2.2.44 R8 to GENPRU 2.2.45 R; GENPRU 2.2.47 R to GENPRU 2.2.48 R

8

Limits on the use of different forms of capital for banks and building societies (capital resources gearing rules)

GENPRU 2.2.29 R to GENPRU 2.2.31 G; GENPRU 2.2.46 R; GENPRU 2.2.49 R

Calculation of capital resources for BIPRU investment firms

GENPRU 2.2.20 G to GENPRU 2.2.21 G; GENPRU 2 Annex 4 to GENPRU 2 Annex 6

Limits on the use of different forms of capital for BIPRU investment firms (certain types of capital resources cannot be used for certain purposes)

GENPRU 2.2.44 R8 to GENPRU 2.2.45 R; GENPRU 2.2.47 R to GENPRU 2.2.48 R

8

Limits on the use of different forms of capital for BIPRU investment firms (capital resources gearing rules)

GENPRU 2.2.29 R to GENPRU 2.2.31 G; GENPRU 2.2.46 R; GENPRU 2.2.50 R

Example of how the capital resources calculation for BIPRU firms works

GENPRU 2.2.51 G to GENPRU 2.2.59 G

Capital used to meet the base capital resources requirement for BIPRU firms

GENPRU 2.2.60 R to GENPRU 2.2.61 G12

12Notification of issuance of capital instruments.

GENPRU 2.2.61A R to GENPRU 2.2.61H G

Tier one capital instruments: general

GENPRU 2.2.9 G to GENPRU 2.2.10 G; GENPRU 2.2.62 R to GENPRU 2.2.69 G; GENPRU 2.2.80 R to GENPRU 2.2.82 G

8Tier one capital: payment of coupons (BIPRU firm only)

GENPRU 2.2.69A R to GENPRU 2.2.69F G

Core tier one capital: permanent share capital

GENPRU 2.2.83 R to 10GENPRU 2.2.84A G10

10General conditions for eligibility of capital instruments as core tier one capital (BIPRU firm only)

GENPRU 2.2.83A R to GENPRU 2.2.83D G; GENPRU 2.2.84A G

10Core tier one capital: exception to eligibility criteria (building societies only)

GENPRU 2.2.83E R to GENPRU 2.2.83H G

Core tier one capital: profit and loss account and other reserves: material applicable to all firms

GENPRU 2.2.85 R; GENPRU 2.2.87 R to GENPRU 2.2.89 G; GENPRU 2.2.91 G

Core tier one capital: profit and loss account and other reserves: material specific to BIPRU firms

GENPRU 2.2.86 R; GENPRU 2.2.90 R; GENPRU 2.2.92 G

Core tier one capital: provisions relating to partnerships and limited liability partnerships

GENPRU 2.2.93 R to GENPRU 2.2.100 R

Core tier one capital: share premium account

GENPRU 2.2.101 R

Core tier one capital: externally verified interim net profits

GENPRU 2.2.102 R to GENPRU 2.2.103 G

Core tier one capital: valuation differences and fund for future appropriations for insurer

GENPRU 2.2.104 R to GENPRU 2.2.108 R

Core tier one capital: deferred shares (building society only)16

GENPRU 2.2.108A R to GENPRU 2.2.108B G

Tier one capital: perpetual non-cumulative preference shares16 (insurer only)8

GENPRU 2.2.109 R to GENPRU 2.2.110 G

Innovative tier one capital (excluding issues through SPVs) (insurer only)8

GENPRU 2.2.76 R; GENPRU 2.2.113 R to GENPRU 2.2.122 G

8Hybrid capital (excluding issues through SPVs) (BIPRU firm only)

GENPRU 2.2.115A R to GENPRU 2.2.119 G

Hybrid capital8 (issues through SPVs) (BIPRU firm only)8

8

GENPRU 2.2.123 R to GENPRU 2.2.137 R

Tier one capital: conversion ratio

GENPRU 2.2.138 R to GENPRU 2.2.144 G

Tier one capital: requirement to have sufficient unissued stock

GENPRU 2.2.145 R

Deductions from tier one capital resources

GENPRU 2.2.155 R to GENPRU 2.2.156 G

Tier two capital

GENPRU 2.2.11 G; GENPRU 2.2.157 G to GENPRU 2.2.197 G

Deductions from tier one capital resources and tier two capital resources

GENPRU 2.2.202 R to GENPRU 2.2.240 G

Tier three capital

GENPRU 2.2.12 G; GENPRU 2.2.241 R to GENPRU 2.2.249 R

Deductions from total capital resources

GENPRU 2.2.14 G to GENPRU 2.2.16 G; GENPRU 2.2.250 R to GENPRU 2.2.265 R

The effect of swaps

GENPRU 2.2.198 R to GENPRU 2.2.201 R

Step-ups (Tier one capital and tier two capital)

GENPRU 2.2.76 R; GENPRU 2.2.146 R to GENPRU 2.2.154 G

Redemption of tier one instruments

GENPRU 2.2.64R (3); GENPRU 2.2.70 R to GENPRU 2.2.79 G

8Purchases of tier one instruments: BIPRU firm only

GENPRU 2.2.79A R to GENPRU 2.2.79H G; GENPRU 2.2.79L G10

Redemption of tier two instruments

GENPRU 2.2.172 R to GENPRU 2.2.174 R; GENPRU 2.2.177 R to GENPRU 2.2.178 R (upper tier two instruments); GENPRU 2.2.194 R to GENPRU 2.2.197 G (lower tier two instruments)

Non-standard capital instruments

GENPRU 2.2.13 G

Standard form documentation for subordinated debt

GENPRU 2.2.164 G

Public sector guarantees

GENPRU 2.2.276 R

Other capital resources for insurers: unpaid share capital or unpaid initial funds and calls for supplementary contributions

GENPRU 2.2.266 G to GENPRU 2.2.269 G

Additional requirements for insurer carrying on with-profits insurance business

GENPRU 2.2.270 R to GENPRU 2.2.275 G
GENPRU 2.2.7GRP
Parts of this section are irrelevant to a BIPRU firm whose capital resources consist of straightforward capital instruments. 242
GENPRU 2.2.8GRP
The appropriate regulator has divided its definition of capital into categories, or tiers, reflecting differences in the extent to which the capital instruments concerned meet the purpose and conform to the characteristics of capital listed in GENPRU 2.2.9 G. The appropriate regulator generally prefers a firm to hold higher quality capital that meets the characteristics of permanency and loss absorbency that are features of tier one capital. Capital instruments falling into
GENPRU 2.2.11GRP
Tier two capital includes forms of capital that do not meet the requirements for permanency and absence of fixed servicing costs that apply to tier one capital. Tier two capital includes, for example:(1) capital which is perpetual (that is, has no fixed term) but cumulative (that is, servicing costs cannot be waived at the issuer's option, although they may be deferred – for example, cumulative preference shares); only perpetual capital instruments may be included in upper tier
GENPRU 2.2.13GRP
There may be examples of capital instruments that, although based on a standard form, contain structural features that make the rules in this section difficult to apply. In such circumstances, a firm may seek individual guidance on the application of those rules to the capital instrument in question. See SUP 9 (Individual guidance) for the process to be followed when seeking individual guidance.
GENPRU 2.2.61ARRP
12This section applies to a firm intending to issue a capital instrument on or after 1 March 2012 for inclusion in its capital resources.
GENPRU 2.2.61BRRP
12A firm must notify the appropriate regulator in writing of its intention to issue a capital instrument which it intends to include within its capital resources at least one month before the intended date of issue, unless there are exceptional circumstances which make it impracticable to give such a period of notice, in which event the firm must give as much notice as is practicable in those circumstances. When giving notice, a firm must:(1) provide details of the amount of
GENPRU 2.2.61CRRP
12A firm must provide a further notification to the appropriate regulator in writing including all the information required in GENPRU 2.2.61BR (1) to (4) as soon as it proposes any change to the intended date of issue, amount of issue, type of investors, stage of capital or any other feature of the capital instrument to that previously notified to the appropriate regulator.
GENPRU 2.2.61DRRP
12If a firm proposes to establish a debt securities program for the issue of capital instruments for inclusion within its capital resources, it must: (1) notify the appropriate regulator of the establishment of the program; and(2) provide the information required by GENPRU 2.2.61BR (1) to (4)at least one month before the first proposed drawdown. Any changes must be notified to the appropriate regulator in accordance with GENPRU 2.2.61C R.
GENPRU 2.2.61ERRP
12The capital instruments to which GENPRU 2.2.61B R does not apply are:(1) ordinary shares which:(a) are the most deeply subordinated capital instrument issued by the firm;(b) meet the criteria set out in GENPRU 2.2.83R (2) and (3) and, for a BIPRU firm, GENPRU 2.2.83A R; and(c) are the same as ordinary shares previously issued by the firm;(2) debt instruments issued from a debt securities program, provided that program was notified to the appropriate regulator prior to its first
GENPRU 2.2.61FRRP
12A firm must notify the appropriate regulator in writing, no later than the date of issue, of its intention to issue a capital instrument listed in GENPRU 2.2.61E R which it intends to include within its capital resources. When giving notice, a firm must: (1) provide the information set out at GENPRU 2.2.61BR (1) to (3); and(2) confirm that the terms of the capital instrument have not changed since the previous issue by the firm of that type of capital instrument.
GENPRU 2.2.62RRP
A firm may not include a capital instrument in its tier one capital resources unless it complies with the following conditions:(1) it is included in one of the categories in GENPRU 2.2.63 R;(2) it complies with the conditions set out in GENPRU 2.2.64 R;(3) i t is not excluded under GENPRU 2.2.65 R (Connected transactions); and(4) it is not excluded by any of the rules in GENPRU 2.2.
GENPRU 2.2.64RRP
The conditions that an item of capital of a firm must comply with under GENPRU 2.2.62R (2)1 are as follows:(1) it is issued by the firm;(2) it is fully paid and the proceeds of issue are immediately and fully available to the firm;(3) it:(a) cannot be redeemed at all or can only be redeemed on a winding up of the firm; or(b) complies with the conditions in GENPRU 2.2.70 R (Basic requirements for redeemability) and GENPRU 2.2.76 R (Redeemable instrument subject to a step-up);(4)
GENPRU 2.2.67AGRP
4The purpose of GENPRU 2.2.64R (4) is to ensure that a firm retains flexibility over the payment of coupons and can preserve cash in times of financial stress. However, a firm may include, as part of the capital instrument terms, a right to make payments of a coupon mandatory if an item of capital becomes ineligible to form part of its capital resources (e.g. through a change in the relevant rules) and the firm has notified the appropriate regulator that the instrument is in
GENPRU 2.2.68ARRP
8A BIPRU firm must not include a capital instrument in its tier one capital resources if:(1) the capital instrument is affected by a dividend stopper; and (2) the dividend stopper operates in a way that hinders recapitalisation.
GENPRU 2.2.68BGRP
8A dividend stopper prevents the firm from paying any coupon on more junior or pari passu instruments in a period in which the firm omits payments to the holder of the capital instrument containing the dividend stopper, and so may hinder the recapitalisation of the firm contrary to GENPRU 2.2.64R (6).
GENPRU 2.2.69GRP
An item of capital does not comply with GENPRU 2.2.64R (10) if it is marketed as a capital instrument that would only qualify for a lower level of capital or on the basis that investing in it is like investing in an instrument in a lower tier of capital. For example, an undated capital instrument should not be marketed as a dated capital instrument if the terms of the capital instrument include an option by the issuer to redeem the capital instrument at a specified date in the
GENPRU 2.2.70RRP
A firm may not include a capital instrument in its tier one capital resources, unless its contractual terms are such that:(1) (if it is redeemable other than in circumstances set out in GENPRU 2.2.64R (3)(a) (redemption on a winding up)) it is redeemable only at the option of the firm or, in the case of a BIPRU firm, on the date of maturity;88(2) the firm cannot exercise that redemption right:(a) before the fifth anniversary of its date of issue;(b) unless it has given notice
GENPRU 2.2.70AGRP
8In the case of a BIPRU firm, an incentive to redeem is a feature of a capital instrument that would lead a reasonable market participant to have an expectation that the firm will redeem the instrument. The appropriate regulator considers that interest rate step-ups and principal stock settlements, in conjunction with a call option, are incentives to redeem. Only instruments with moderate incentives to redeem are permitted as tier one capital, in accordance with the limited conversion
GENPRU 2.2.78RRP
(1) A share is not redeemable for the purposes of this section merely because the Companies Act 1985,6 the Companies (Northern Ireland) Order 1986 or the Companies Act 20066 allows the firm that issued it to purchase it.6(2) A capital instrument is not redeemable for the purposes of this section merely because the firm that issued it has a right to purchase it similar to the right in (1).
GENPRU 2.2.79CRRP
8GENPRU 2.2.79AR (4) does not apply if:10(1) the firm replaces the capital instrument it intends to purchase with a capital instrument that is included in a higher stage of capital or the same stage of capital; and(2) the replacement capital instrument has already been issued.
GENPRU 2.2.81RRP
A firm may not include a capital instrument other than a share in its tier one capital resources unless it complies with GENPRU 2.2.80R (3).
GENPRU 2.2.82GRP
There are additional loss absorption requirements for (in the case of an insurer)8innovative tier one capital and (in the case of a BIPRU firm) hybrid capital8 in GENPRU 2.2.116 R to GENPRU 2.2.118 R (Other tier one capital: loss absorption) and (in the case of a BIPRU firm) for core tier one capital in GENPRU 2.2.83AR (9) to (10) (General conditions for eligibility of capital instruments as core tier one capital (BIPRU firm only)).1088
GENPRU 2.2.83RRP
Permanent share capital means an item of capital which (in addition to satisfying GENPRU 2.2.64 R) meets the following conditions:(1) it is:(a) an ordinary share; or(b) a members' contribution; or(c) part of the initial fund of a mutual; or8(d) a deferred share;8(2) any coupon on it is not cumulative, the firm is under no obligation to pay a coupon in any circumstances and the firm has the right to choose the amount of any coupon that it pays;10(3) the terms upon which it is issued
GENPRU 2.2.83ARRP
10The conditions that a BIPRU firm's permanent share capital must comply with under GENPRU 2.2.83AR (4) or that a BIPRU firm'seligible partnership capital or eligible LLP members' capital must comply with under GENPRU 2.2.95 R are as follows:(1) it is undated;(2) the terms upon which it is issued do not give the holder a preferential right to the payment of a coupon;(3) the terms upon which it is issued do not indicate the amount of any coupon that may be payable nor impose an
GENPRU 2.2.83ERRP
10A building society may include in stage A of the capital resources table a capital instrument that includes in its terms of issue an upper limit on the amount of any coupon that may be payable and the prohibition on a coupon limit under GENPRU 2.2.83AR (3) does not apply to that capital instrument, provided that:(1) the capital instrument satisfies all other conditions for eligibility as core tier one capital set out in GENPRU 2.2.83 R to GENPRU 2.2.83A R;(2) the coupon limit
GENPRU 2.2.83FRRP
10A building society must not issue a capital instrument that includes a coupon limit in its terms of issue in accordance with GENPRU 2.2.83E R unless it has notified the PRA of its intention to do so at least one month before the intended date of issue.
GENPRU 2.2.83HGRP
10The purpose of GENPRU 2.2.83ER (6) is to limit the potential preferential rights that may arise on capital instruments that are not subject to a coupon limit. The PRA considers that "preferential" refers to both priority of coupon payment and level of coupon payment. Therefore the PRA considers that:(1) a coupon arising on a capital instrument which is not subject to an explicit coupon limit within its terms of issue is likely to be preferential to a coupon on a capital instrument
GENPRU 2.2.95RRP
A BIPRU firm that is a partnership or a limited liability partnership may not include eligible partnership capital or eligible LLP members' capital in its tier one capital resources unless (in addition to GENPRU 2.2.62 R (General conditions relating to tier one capital)) it complies with GENPRU 2.2.83R (2) (10Coupons should not be cumulative or mandatory) and GENPRU 2.2.83A R to GENPRU 2.2.83C R (General conditions for eligibility of capital instruments as core tier one capital
GENPRU 2.2.115ARRP
8A BIPRU firm must not include a capital instrument at stage B1 of the calculation in the capital resources table unless (in addition to satisfying all the other requirements in relation to tier one capital and hybrid capital) its contractual terms are such that:(1) it cannot be redeemed in cash but can only be converted into core tier one capital;(2) it must be converted into core tier one capital by the firm during emergency situations; (3) the emergency situations referred
GENPRU 2.2.115BGRP
8The intention of GENPRU 2.2.115A R is to ensure that capital instruments included in stage B1 of the calculation in the capital resources table have the same permanence as core tier one capital; the presence of a call option for these instruments may reduce their permanence.
GENPRU 2.2.115DRRP
8A BIPRU firm may include a capital instrument at stage B2 of the calculation in the capital resources table if (while satisfying all the other requirements in relation to tier one capital and hybrid capital)it cannot be included at stage B1 of that calculation as it does not satisfy the requirements of GENPRU 2.2.115A R.
GENPRU 2.2.115FRRP
8A BIPRU firm may include a capital instrument at stage C of the calculation in the capital resources table, and must not include it in stage B1 or B2 of that calculation, if (in addition to satisfying all the other requirements in relation to tier one capital and hybrid capital) it either:(1) is dated; or(2) provides an incentive for the firm to redeem it, as assessed at the date of its issue.
GENPRU 2.2.116ARRP
8A BIPRU firm must not include a capital instrument that is not a share at stage B1, B2 or C of the calculation in the capital resources table unless (in addition to satisfying all the other requirements in relation to tier one capital and hybrid capital) the firm's obligations under the instrument either:(1) do not constitute a liability (actual, contingent or prospective) under section 123(2) of the Insolvency Act 1986; or(2) do constitute such a liability but the terms of the
GENPRU 2.2.117GRP
The effect of GENPRU 2.2.116 R and GENPRU 2.2.116A R8 is that if a potential tier one instrument does constitute a liability, this should only be the case when the firm is able to pay that liability but chooses not to do so. As tier one capital resources for an insurer8 should be undated, this will generally only be relevant on a solvent winding up of the firm. The holder should agree that the firm has no liability (including any contingent or prospective liability) to pay any
GENPRU 2.2.117ARRP
8A BIPRU firm must not include a capital instrument at stage B1, B2 or C of the calculation in the capital resources table unless (in addition to satisfying all the other requirements in relation to tier one capital and hybrid capital) its contractual terms provide for a mechanism within the instrument which:(1) is clearly defined and legally certain;(2) is disclosed and transparent to the market;(3) makes the recapitalisation of the firm more likely by adequately reducing the
GENPRU 2.2.118RRP
8(1) 8An insurer may not include an innovative tier one instrument, unless it is a preference share, in its tier one capital resources unless it has obtained a properly reasoned independent legal opinion from an appropriately qualified individual confirming that the criteria in GENPRU 2.2.64R (6) (loss absorption) and GENPRU 2.2.80 R to GENPRU 2.2.81 R (Loss absorption) are met.(2) A BIPRU firm may not include a capital instrument at stage B1, B2 or C of the calculation in the
GENPRU 2.2.118AGRP
8For the purposes of GENPRU 2.2.118R (2), the focus of the legal opinion in considering GENPRU 2.2.64R (6)(b) should be on whether appropriate mechanisms exist and are designed to operate to ensure that the value of the hybrid capital instrument and the position of the hybrid capital holder are not enhanced by recapitalisation.
GENPRU 2.2.128GRP
An SPV could take the form of a limited partnership. In such an arrangement, holders of a capital instrument issued by the SPV which do not belong to the group of the BIPRU firm in question should have no right to participate in the management of the partnership, whether under the partnership's constitutional documents or the transaction documents. In general, this means that they should be treated as limited partners. It is expected that the general partner, having control of
GENPRU 2.2.128BRRP
8The analysis must be set out in writing and dated before the date of issue of the capital instrument and the firm must be able to show that the analysis has been fully considered as part of its decision to proceed with the issue. The analysis must be conducted by a person or persons appropriately qualified to assess the relevant risks and that person may be an independent adviser or an employee of the firm who is not part of the business unit responsible for the transaction
GENPRU 2.2.129RRP
The SPV referred to in GENPRU 2.2.124R (2)(a) must fund its subscription for the capital issued by the firm by the issue of capital that satisfies the following conditions:(1) it must comply with the conditions for qualification as tier one capital, as amended by GENPRU 2.2.130 R, as if the SPV was itself a firm seeking to include that capital in its tier one capital resources;(2) 48(a) its terms must include an obligation on the firm that, in the event of a collapse of the SPV
GENPRU 2.2.131RRP
In relation to the obligation to substitute described in GENPRU 2.2.129R (2), a firm must take all reasonable steps to ensure that it has at all times authorised and unissued capital instruments which are core tier one capital8 (and the authority to issue them) sufficient to discharge its obligation to substitute.8
GENPRU 2.2.131AGRP
4GENPRU 2.2.129R (2) and GENPRU 2.2.131 R allow a firm to replace the capital issued by the SPV with capital instrument which are core tier one capital.888
GENPRU 2.2.145RRP
(1) This rule applies to a potential tier one instrument of a firm where either:(a) the redemption proceeds; or(b) any coupon on that capital item;can be satisfied by the issue of another capital instrument.(2) A firm may only include an item of capital to which this rule applies in its tier one capital resources if the firm has authorised and unissued capital instruments of the kind in question (and the authority to issue them):(a) that are sufficient to satisfy all such payments
GENPRU 2.2.147RRP
(1) A firm may not include in its tier one capital resources a tier one instrument that is or may be subject to a step-up that does not meet the definition of moderate in the press release of the Basle Committee on Banking Supervision of 27th October 1998 called "Instruments eligible for inclusion in Tier 1 capital".(2) For the purpose of (1) the words in that press release "than, at national supervisory discretion, either" are replaced by "than the higher of the following two
GENPRU 2.2.153RRP
(1) A firm must not include in its tier one capital resources a potential tier one instrument that is or may become subject to a step-up if that step-up can arise earlier than the tenth anniversary of the date of issue of that item of capital.(2) A firm must not include in its tier two capital resources a capital instrument that is or may become subject to a step-up if that step-up can arise earlier than the fifth anniversary of the date of issue of that item of capital.
GENPRU 2.2.154GRP
Debt instruments containing embedded options, e.g. issues containing options for the interest rate after the step-up to be at a margin over the higher of two (or more) reference rates, or for the interest rate in the previous period to act as a floor, may affect the funding costs of the borrower and imply a step-up. In such circumstances, a firm may wish to seek individual guidance on the application of the rules relating to step-ups to the capital instrument in question. See
GENPRU 2.2.158GRP
Tier two instruments are capital instruments that combine the features of debt and equity in that they are structured like debt, but exhibit some of the loss absorption and funding flexibility features of equity.
GENPRU 2.2.159RRP
A capital instrument must not form part of the tier two capital resources of a firm unless it meets the following conditions:(1) the claims of the creditors must rank behind those of all unsubordinated creditors;(2) the only events of default must be non-payment of any amount falling due under the terms of the capital instrument or the winding-up of the firm and any such event of default must not prejudice the subordination in (1);(3) to the fullest extent permitted under the
GENPRU 2.2.161RRP
A capital instrument may be included in a firm'stier two capital resources even though the remedies available to the subordinated creditor go beyond those referred to in GENPRU 2.2.159R (3), if the following conditions are satisfied:(1) those remedies are not available for failure to pay any amount of principal, interest or expenses or in respect of any other payment obligation; and(2) those remedies do not in substance amount to remedies to recover payment of the amounts in
GENPRU 2.2.164GRP
The appropriate regulator is more concerned that the subordination provisions listed in GENPRU 2.2.159 R should be effective than that they should follow a particular form. The appropriate regulator does not, therefore, prescribe that the loan agreement or capital instrument should be drawn up in a standard form.
GENPRU 2.2.166GRP
GENPRU 2.2.159R (3) allows a capital instrument to form part of the tier two capital resources even though the laws of the relevant jurisdiction do not allow remedies to be limited in the way described there. For example it is not possible to limit certain remedies in the case of an issue in the United States that is SEC-registered and subject to the provisions of the Trust Indenture Act.
GENPRU 2.2.169RRP
An item of capital does not comply with GENPRU 2.2.159 R (General conditions for eligibility as tier two capital instruments) or GENPRU 2.2.177 R (Upper tier two capital: General) if the issue of that item of capital by the firm is connected with one or more other transactions which, when taken together with the issue of that item, could result in that item of capital no longer displaying all of the characteristics set out in whichever of those rules apply.
GENPRU 2.2.171RRP
A firm must not amend the terms of the capital or the documents referred to in GENPRU 2.2.159R (8) unless:(1) at least one Month before the amendment is due to take effect, the firm has given the appropriate regulator notice in writing of the proposed amendment and the appropriate regulator has not objected; and(2) that notice includes confirmation that the legal opinions referred to in GENPRU 2.2.159R (12) and, if applicable, GENPRU 2.2.163 R (General conditions for eligibility
GENPRU 2.2.176GRP
Examples of capital instruments which may be eligible to count in upper tier two capital resources include the following:(1) perpetual cumulative preference shares;(2) perpetual subordinated debt; and(3) other instruments that have the same economic characteristics as (1) or (2).
GENPRU 2.2.177RRP
A capital instrument must (in addition to meeting the requirements of the rules about eligibility for inclusion in tier two capital) meet the following conditions before it can be included in a firm'supper tier two capital resources:(1) it must have no fixed maturity date;(2) the terms of the instrument must provide for the firm to have the option to defer any coupon on the debt, except that the firm need not have that right in the case of a coupon payable in the form of an item
GENPRU 2.2.179GRP
(1) The purpose of GENPRU 2.2.177R (2) is to ensure that a firm which issues an item of capital with a coupon retains flexibility over the payments of such coupon and can preserve cash in times of financial stress. However, a firm may include, as part of the capital instrument terms, a right to make payments of a coupon mandatory if an item of capital becomes ineligible to form part of its capital resources (for example, through a change in the relevant rules) and the firm has
GENPRU 2.2.180RRP
A capital instrument may only be included in upper tier two capital resources if a firm's obligations under the instrument either:(1) do not constitute a liability (actual, contingent or prospective) under section 123(2) of the Insolvency Act 1986; or(2) do constitute such a liability but the terms of the instrument are such that:(a) any such liability is not relevant for the purposes of deciding whether:(i) the firm is, or is likely to become, unable to pay its debts; or(ii)
GENPRU 2.2.194RRP
A firm may include a capital instrument in its lower tier two capital resources if (in addition to meeting the requirements of the rules about eligibility for inclusion in tier two capital) either the holder has no right to repayment or it satisfies either of the following conditions:(1) it has an original maturity of at least five years; or(2) it is redeemable on notice from the holder, but the period of notice of repayment required to be given by the holder is five years or
GENPRU 2.2.195GRP
A firm may include perpetual capital instruments that do not meet the conditions in GENPRU 2.2.177 R (Eligibility conditions for upper tier two capital) in lower tier two capital resources if they meet the general conditions described in GENPRU 2.2.159 R (General conditions for eligibility as tier two capital instruments).
GENPRU 2.2.200RRP
A firm must recognise, in accordance with GENPRU 2.2.201 R, the effect of a foreign currency hedge on a debt instrument (as defined in GENPRU 2.2.198 R) denominated in a foreign currency or of an interest rate hedge on a fixed rate coupon debt instrument if:(1) the accounting framework to which the firm is subject as referred to in GENPRU 1.3.4 R (General requirements: accounting principles to be applied) provides for a fair value hedge accounting relationship between a liability
GENPRU 2.2.245RRP

Table: Application of tier two capital rules to tier three debt

This table belongs to GENPRU 2.2.244 R

Tier two capital rule

Adjustment

GENPRU 2.2.159 R (General conditions for eligibility as tier two capital)

The references in GENPRU 2.2.159R (5) (Capital must not become repayable prior to stated maturity date except in specified circumstances) to repayment at the option of the holder are replaced by a reference to GENPRU 2.2.242R (1) (Upper tier three capital should have maturity or notice period of at least two years)

The reference in GENPRU 2.2.159R (10) (Description of tier two capital in marketing documents) to

GENPRU 2.2.271 R (Other requirements: insurers carrying on with-profits business (Insurer only)) does not apply

GENPRU 2.2.160 R (Holder of a non-deferred share of a building society to be treated as a senior creditor)

GENPRU 2.2.161 R (Additional remedies)

GENPRU 2.2.163 R (Legal opinion where debt subject to a law of a country outside the United Kingdom)

GENPRU 2.2.169 R (Ineligibility as tier two capital owing to connected transactions)

The reference to GENPRU 2.2.177 R (General eligibility conditions for upper tier two capital) does not apply

GENPRU 2.2.171 R (Amendments to terms of the capital instrument)

GENPRU 2.2.172 R to GENPRU 2.2.173 R (Redeemability at the option of the issuer)

GENPRU 2.2.174 R (Notification of redemption)

References in the rules in the first column to the fifth anniversary are amended so as to refer to the second anniversary.
BIPRU 8.6.1ARRP
3This section applies to a firm if another member of its group intends to issue a capital instrument on or after 1 March 2012 for inclusion in the firm'scapital resources or consolidated capital resources of its UK consolidation group or non-EEA sub-group.
BIPRU 8.6.1BRRP
3A firm must notify the appropriate regulator in writing of the intention of another member of its group which is not a firm to issue a capital instrument which the firm intends to include within its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group as soon as it becomes aware of the intention of the groupundertaking to issue the capital instrument. When giving notice, a firm must:(1) provide details of the amount of capital
BIPRU 8.6.1CRRP
3A firm must provide a further notification to the appropriate regulator in writing including all the information required in BIPRU 8.6.1BR (1) to (4) as soon as it becomes aware of any changes that are proposed to the intended date of issue, amount of issue, type of investors, stage of capital or any other feature of the capital instrument previously notified to the appropriate regulator.
BIPRU 8.6.1DRRP
3If a groupundertaking proposes to establish a debt securities program for the issue of capital instruments which the firm intends to include within its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group, it must:(1) notify the appropriate regulator of the establishment of the program; and(2) provide the information required by BIPRU 8.6.1BR (1) to (4); as soon as it becomes aware of the proposed establishment. The appropriate
BIPRU 8.6.1ERRP
3The capital instruments to which BIPRU 8.6.1B R does not apply are:(1) ordinary shares issued by a groupundertaking which:(a) are the most deeply subordinated capital instrument issued by that groupundertaking;(b) meet the criteria set out in GENPRU 2.2.83R (2) and GENPRU 2.2.83R (3) and GENPRU 2.2.83A R; and(c) are the same as ordinary shares previously issued by that groupundertaking;(2) debt instruments issued from a debt securities program established by a groupundertaking,
BIPRU 8.6.1FRRP
3A firm must notify the appropriate regulator in writing, no later than the date of issue, of the intention of a groupundertaking to issue a capital instrument listed in BIPRU 8.6.1E R which the firm intends to include within its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group. When giving notice a firm must:(1) provide the information set out at BIPRU 8.6.1BR (1) to (3); and(2) confirm that the terms of the capital instrument
BIPRU 8.6.12RRP
Consolidated indirectly issued capital means any capital instrument issued by a member of the UK consolidation group or non-EEA sub-group where:(1) some or all of the following conditions are satisfied:(a) that capital is issued to an SPV; or(b) that capital is issued by an SPV; or(c) the subscription for the capital issued by the member of the group in question is funded directly or indirectly by an SPV; and(2) any of the SPVs referred to in (1) is a member of the UK consolidation
BIPRU 8.6.14RRP
Consolidated indirectly issued capital that is eligible for inclusion in the consolidated capital resources of a UK consolidation group or non-EEA sub-group may only be included as a minority interest created by the capital instrument issued by the SPV referred to in BIPRU 8.6.13 R. If it is eligible, it is innovative tier one capital.
BIPRU 11.5.3RRP
A firm must disclose the following information regarding its capital resources:(1) summary information on the terms and conditions of the main features of all capital resources items and components thereof, including:2(a) 2hybrid capital;(b) 2capital instruments which provide an incentive for the firm to redeem them; and(c) 2capital instruments which the firm treats as tier one capital under GENPRU TP8A;(2) tier one capital resources, with separate disclosure of:22(a) 2all positive
GENPRU 2.1.7GRP
This section sets capital resources requirements for a firm. GENPRU 2.2 (Capital resources) sets out how, for the purpose of meeting capital resources requirements, the amounts or values of capital, assets and liabilities are to be determined. More detailed rules relating to capital, assets and liabilities are set out in GENPRU 1.3 (Valuation) and, for an insurer, INSPRU and, for a BIPRU firm, BIPRU.